Now that we are in the waning days of 2012, it is time once again to review where we are and prepare for what will no doubt be another interesting year in 2013.Â After a rather sluggish summer, the market regained some velocity in the fourth quarter.Â Supply continues to build, although it is still well below average.Â Below $200,000 demand remains strong and we are still seeing multiple offers.Â Prices in this range continue to edge up.Â Not surprisingly, the highest appreciation rates have been occurring in those places where prices crumbled the most in 2007-2009 – primarily the drive until you qualify communities. Â Â In contrast, higher priced homes have shown only a small amount of appreciation with just a few posting double-digit improvements such as – Carefree at 11.7%, Desert Hills at 13.9% and Tempe at 11.0%
The increasing prices are luring both sidelined sellers and even builders back into the marketplace.Â At some point, the increased prices will drive back the demand resulting in a balanced market.Â We do expect spring of 2013 to be a very healthy market for both buying and selling.
Probably the best summary of the 2012 market is stated most perfectly by Michael Orr of the Cromford Report:
â€œThe change in price over the last 12 months is clearly impressive. There are very few occasions in which the average price per sq. ft. rises by 25%. The only previous time I know of is May 2005 to March 2006 and that was at the height of the bubble. A rise of 2.7% in the single month of September would also normally be startling, but we have got used to big numbers. When the market eventually gets back to normal we should expect to see 2.7% for a whole year, not a single month.
What we have seen is the “coiled spring theory” in action. Supply got extremely low last year but prices refused to react until the fourth quarter of last year. Now prices have moved substantially higher we are seeing signs of the market cooling. Supply is growing as sellers start to take advantage of the higher prices achievable. Some buyers have become discouraged by the amount of competition and higher prices and so left the market, resulting in some softening of demand. Sales volumes though ARMLS are well down. However, this is somewhat misleading because a large number of real estate transactions are happening outside of the MLS. Deals between investors, new homes sales, trustee sales, pocket listings and private sales add up to a significant volume which is missing from the MLS numbers but captured by the county records. â€œ
For the 3rd Quarter, normal sales are now 59.5% of the market. The number of normal sales should continue to grow. Â Short sales have stabilized at 30.17% of the market (and we expect them to be a slowly declining part of our market for the next couple of years).Â Happily, REO/HUD are now down to only 13.95% and are becoming almost irrelevant.Â On that note, you may remember last month we commented on Bank of America suddenly shifting gears by taking back into their inventory REOs rather than selling them at auction to investors.Â After 5 weeks of this, it appears that they have stopped that program.Â Go figure.Â We expect to see a small bump in REO product as these homes go to market but it still will have a negligible effect. The number of Notices of Trustee Sale inMaricopaCounty was 2,690, the lowest total since July 2007 over 5 years ago.Â This is all good news.Â Our hope is that by the end of 2013 REOs will be back in the â€œnormalâ€ range.
No matter what the new year brings, we will keep you posted on our ever-changing market.Â In closing, we wish to thank all of our wonderful friends and clients for your trust and for allowing us to assist you with your real estate needs.Â It is an honor to know you and to serve you.Â We are truly grateful.
Russell & Wendy Shaw